Mr Major’s Speech to the Institute of Directors – 24 April 1996
Below is the text of Mr Major’s speech to the Institute of Directors in London on Wednesday 24th April 1996.
PRIME MINISTER:
Mr President, Ladies and Gentlemen. A few moments ago, David, you encouraged us with details of your latest business confidence survey. I suppose I might call it a sort of alternative news summary on how I hope it forms the basis of the real news summary in the days that lie ahead. Clearly what is happening in the economy is of crucial importance to all the plans we have.
What I think that survey confirmed is what many of us have felt for some time: the economic prospects are bright, they will get brighter, and increasingly we have a lot to be confident about in this country. And I think it is time to be positive – I hope that message will be carried through to people up and down the country. This pervading atmosphere of gloom that so many people have perpetrated does no good to them, no good to the country, no good to our prospects and there is no conceivable justification for it. It is about time for the gloom-mongers to depart and for us to look more clearly at the prospects that lie ahead.
The centre of your debate today is Europe. And firstly this morning I want to set out my view of the opportunities it offers and the fierce debate that almost invariably surrounds it. I would like to set out how I see the future of Europe over the coming years and what I see as Britain’s place in it.
For the last 30 years, Europe has been the great explosive issue of British politics. Our membership of the European Community, as it was then called, was confirmed in a referendum in 1975. Today there are some who question that membership in each political party and in the media.
I understand the concerns and frustrations that lead to that questioning, in many ways I don’t find it surprising. For years past some have portrayed Europe only in the most negative terms. Every frustration is played up, often inaccurately; every benefit denied at worst, or ignored at best. And in these circumstances it is little wonder that the European Union has become so unpopular in the United Kingdom.
But there is another side to the picture. I also see clearly the hard-headed benefits that Britain has gained from its membership. And as Prime Minister, I believe it does the country no service whatsoever to suggest that the only choice we face is either to go along with every demand our partners make, or to head for the exit. That is naive, it is damaging and in my judgment it is just plain wrong.
We are in Europe and we all know that we are staying in Europe. And anyone who seriously thinks of leaving should perhaps explain to the nation precisely what that would mean. What, I wonder, would be the impact on inward investment, which accounts for three-quarters of a million jobs in manufacturing alone? Would the Nissans, the Toyotas, the Samsungs still be so keen to come here if we were not playing a leading role in the European Union? What would be the effect on the city and the great exporting companies were we to leave the Union? Would we be taken more seriously, or less seriously, in the wider world? And why have more and more countries in Europe, including some of the most prosperous, decided to join the European Union in recent years?
Some suggest we could just negotiate a trading relationship with Europe. But I must be frank with you. The idea that if we were outside the European Union we could somehow become a trading haven on the edge of Europe, with all the benefits of that vital market of 370 million, while others fix the rules without any regard whatsoever to our vital national interest, seems to me to be cloud cuckoo land. This country is an international trading nation, it is not a little England, and it must never become so.
So the first point is, we are staying in Europe, that is not in dispute. But the second is where the battle must be joined, and that is what sort of Europe are we staying in, and how do we address and remove the legitimate concerns that so many people have in this country?
Let me be frank. Some politicians in Europe do have an agenda of ever greater integration, an intent to subsume states into common institutions in order to prevent the re-emergence of old national ambitions and rivalries. And they believe in that integration just as passionately as many of us oppose it.
I understand and I respect their views, they reflect the long experience of wars and conflicts right across the continent – a different experience from ours in this country. But I don’t believe they are the right way to develop European cooperation. The nation state that we care about so much lends security, comfort and familiarity and people need that more than ever at a time of change and insecurity.
You cannot legislate for a common nationality or a common sense of identity. The nations of Europe have developed over centuries, their cultural traditions can’t be eradicated by a simple stroke of the pen, and nor should they be. That would not carry the consent of the peoples of Europe, whether in Britain or elsewhere. And if politicians ignore those realities we would increase rather than reduce conflicts and tensions across Europe, we would set at risk all that Europe has achieved.
So we in Britain are not going down that centralising route. At Maastricht I said no to policies that I thought would be damaging to the interests of this country. And if I had not won on those critical issues, there would have been no treaty for there would have been no agreement. And equally on the intergovernmental conference we have set out our position. Nothing can be imposed upon us in the intergovernmental conference unless we agree to it. And if it isn’t in our interest, I will not agree to it, I will just say ‘No’.
But I don’t seek confrontation and nor do I expect it. In negotiation the European Union can be tough, but in the end it must respect and accept the vital interests of its member nation states.
There are things that we don’t like about Europe, but we must fight them on the arguments, not on the basis of stereotypes and slogans, they do no good to our interests or to our prospects of success. And my personal view is quite clear. Although there are many things in Europe we would like to change, there is a lot that helps us. The balance is in our advantage. Not every decision, of course is exactly what we would have liked, but neither is every decision comfortable for every other country. We aim to build in the years ahead, in the conference and beyond the conference, a Europe that is more in our image and more to our taste. If we win the argument to build a Europe of nation states, all of Europe will benefit. Equally, if others choose to go in a direction that we reject, they need to recognise that we will stand our ground and not follow them in that direction. The Europe that evolves will be flexible, and it will need to be flexible to recognise and accommodate our national interests and beliefs, as well as theirs.
The European debate must take into account not only national interests and sensitivities, but economic realities. And upon those economic realities I want to concentrate for a few moments. Today we live, as no audience knows better than this one, in the most competitive business environment we have known. Competing against countries around the world is an everyday reality. The man in the street in Manchester, Milan or Munich is not only competing with someone else in Europe, he is up against someone on the other side of the globe as well working in Seoul, Shanghai or Singapore. And we compete successfully or we fail, and if we fail, we go out of business. And that is the main challenge facing all businessmen. We need hard-edged policies to address these challenges. Business must win the battles for contracts, not government. But the decisions that government make, and the policies they follow, can help or they can hinder. And if governments get things badly wrong, they will condemn their businesses inevitably to defeat.
Many people talk about competitiveness, but over 17 years of government our commitment to competitiveness is a matter of record and an article of faith. To be competitive we had to overcome problems that have beset Britain for generations. In the 1980s we tackled the excessive union power that was throttling British enterprise, and Norman Tebbit will speak to you later, and your own President, had a key part in that particular battle, so successfully won.
In the 1990s we have inflation at the moment under better lock and key than it has been for generations, and it is never a battle that is permanently won, and if we were to take the arm-lock off inflation, we would begin to face the problems we have seen in previous years. For decades inflation was the scourge of the British economy, fuelling industrial strife, discouraging investment and making long term planning quite impossible. Now we are enjoying the longest run of low inflation for nearly 50 years.
And not only is that vital for business. If anyone has ever lived in circumstances in which if the bills go up at the end of the week it is difficult to know how they will be paid – they will understand the true wickedness of letting inflation get out of hand and I have no intention of letting that happen again.
In the 1980s we began to return to the private sector businesses that used to be badly run in the public sector at the taxpayers’ expense. They are now profitable companies bidding in markets the world over.
In the 1990s we have tackled the more difficult privatisations, such as coal, successfully privatised in 1994 and now the most efficient coal industry anywhere in Europe. On rail, impossible according to some, quite extraordinary people decided they weren’t in favour of the private sector running British Rail. I sometimes think they forgot who built up the rail network in the first place. And yet that privatisation is now well under way and delivering benefits – new services, new investment, new improvements to stations and in my judgment a much better service for the train user is certainly going to come about as a result of these changes.
Always, right the way through the ‘80s and right into the ’90s, there was always someone saying that each privatisation was one privatisation too far – mustn’t do that, it is change, it is uncomfortable, it is trusting that wicked private sector with something that has been run so comfortably, but so inefficiently, in the public sector. So those pessimists were wholly wrong, they have had to eat their words as one privatisation after another has proved to be a success.
And above all, to be competitive as a nation we have had to get spending under control. It is now coming down again and tax rates have come down with it. British business now has the second lowest burden of business taxation of any G7 country – 6 percent of GDP in Britain, compared with 9 percent in Germany, 14 percent in France.
We now have an economy that is more successful and has better prospects than for a generation. No longer do we look at our European competitors and wonder what their secret is, now they are beginning to envy our success here in the United Kingdom.
Across Europe they know that Britain is the number one destination for inward investment in the European Union, second only to the United States worldwide. They know it is Britain that has Europe’s leading financial centre and the lion’s share of Europe’s most profitable companies. They know it is Britain that has got the lowest unemployment of any major European country and more of our people actually in work than any other major European country. They know that Britain has grown faster than the G7 average each year since 1993 and is expected to do so again this year and again next year.
We have in place all of the ingredients for a rapid growth in prosperity. Life is better, and it should get better yet, but not if we turn our back on the policies that have carved out these opportunities in the first place. Not if we are seduced by candyfloss promises instead of continuing to make the hard choices. Only if we keep on sharpening our national competitive edge will Britain be able to go on winning in the fierce global market place.
I want Britain to be in the front rank of industrial nations. So I have a clear objective for this country’s future – to make Britain the enterprise centre of Europe. That means policies that build on our strengths and it means we must learn the lessons from the world’s fastest growing economies. It means sound responsible economic management – easy to say, not so easy to deliver. But inflation has wrecked too many, recoveries in the past for us to risk throwing that prize away now. It means finding room to reduce taxes by keeping the lid on public expenditure. That is the only way to keep taxes down and then to get them lower still. And that is why, as the economy grows, we are committed to getting spending back down below 40 percent of national income and keeping it there, and that compares to something over 50 percent amongst our partners in Europe. And as we do so, we will press on towards our target of a 20 pence standard rate of income tax and the abolition of capital taxes.
We need an enterprise culture that runs right through society, one that encourages the belief that individuals can themselves, by their own efforts and their own actions, make a difference. And that is why I am determined to stand up for the risk-takers, whether it is the people who are ready to take on and run a piece of the railway, or the companies that will shake up our gas, and electricity, and water markets as competition comes, or the thousands upon thousands of people up and down the country who risk everything they have to make their own small business a success.
And I want more people to have a stake in enterprise. In the last budget, Ken Clarke made it even more attractive for companies to get their workers involved as shareholders. Now it is up to industry to play its part. Many of you of course already have employee share schemes and I hope more of you will. My challenge to you is simple, let us see if we can have a majority of workers in Britain’s large companies holding shares in those companies by the end of this decade. It is eminently achievable and it will do a great service to the spread of capitalism.
Britain is a global trading nation and will remain so, that is both our history and our future but what we trade in will change. Much of tomorrow’s trade will be in information, in technology, in software, in communications and here Britain, with its skills and culture, its trading links right across the globe and the huge incalculable advantage of the English language, is well equipped to take on the world and to win those battles but we can only do it if our young people have the skills they need and that is why progress in education is so important and why we have continued so rigorously with our education reforms.
We have seen a massive explosion in the number of people going into higher education in recent years. In 1979, 1 in 8 of our young people went into higher education; today, no longer 1 in 8, today it is 1 in 3. We are making progress in schools through the national curriculum, through tests and inspection and league tables and vocational education. We are shining a searchlight on the things that went wrong in education. Sometimes, when they become apparent it is embarrassing but it is better to be embarrassed and to have the information so that we can put it right than to let education remain a secret garden when we are not turning out the right sort of skills in our youngsters that industry will need and that they will need for their own life satisfaction.
But we mustn’t only look at the schools. We need to ensure that every adult in Britain understands the opportunities to learn new skills, to take advantage of new technology at work or at leisure. We need to open the nation’s mind to the opportunities that lie ahead so we are getting together with industry on a project for the millennium to let as many people as possible try out computers in schools, in libraries, in shops in the high street, wherever it can be arranged to give them the opportunity to see for themselves and to develop the skills that will equip them and all of us for the changes that lie ahead as we move towards the new century.
Our route to success in the challenging, competitive markets of tomorrow is built upon sound finance, low taxes, the liberation of enterprise, the skills and the capabilities to compete and a global trading ambition to reach out for the markets of tomorrow. Indeed, I believe that is the only way to deliver the wealth, the prosperity, the jobs, the opportunities that this country needs and that the people of this country deserve. It is the only way to meet the challenge of the future.
We would like all of Europe to adopt competitive policies and succeed. There is nothing altruistic about that. We have nothing to gain here in this country if the market on our doorstep goes into decline and if Europe does not put competitiveness at the top of its agenda it will decline and that is why I regret so much that Europe has not yet completed the single market. It should and soon, starting perhaps with some concrete progress on the single market for energy. Energy bills account for a huge proportion of industry’s costs and Europe’s businesses can ill afford to pay over the odds for it.
The same goes for telecommunications. Thanks to privatisation and liberalisation, prices in Britain have tumbled by almost 24 per cent in real terms over the last 5 years. That hasn’t happened in other countries, in the Netherlands for example, where prices have increased by more than 6.5 per cent over the same period, a 30 per cent difference with the drop in the United Kingdom. Here at least, though, there is the promise of progress.to complete the single market with full liberalisation due by 1998 and what a shame as well that negotiations to create a single market in pension funds have come close to stalling since some countries are simply not willing to give up their national captive markets.
Europe as a whole is never going to compete and win in the world if it cannot even bear competition in its home market so Europe must proceed to complete the single market as soon as possible.
Nor can it be right or justifiable that Europe still tolerates huge state aids for some countries’ air lines – that just rewards inefficiency and punishes success – and here too the result is higher prices when what Europe needs is the lower prices that competition and deregulation will surely bring.
I understand, I know why people are reluctant to change, they want to protect jobs. We all want that but jobs are most secure when companies are most successful. The social polices of some of our partners sound very attractive and they advocate them with great self-belief but I believe they are misguided and they destroy jobs. Across Europe, companies are feeling the pain. Much of Germany’s new-job creation is now in Poland or the Czech Republic and in Britain too which, according to the President of the BDI has “the most effective job-producing machine’ in Europe” and I agree with the President upon that point.
In France last month, Brittany Ferries tried to get the government to cut the social costs it must bear as a French employer with a French workforce. Employing 2,500 workers, it claims that it pays up to 18 million pounds a year more than would be paid by a similar British employer. A spokesman was quoted as saying that he wanted “to level the playing field, to find a way of giving us the same overheads as Britain.” Again he is right. He asks for that with good reason.
The difference between our employment costs and Europe’s is stark. For every £100 he pays in wages, a British employer has to add £18 in non-wage costs. Quite enough you might think but in Germany not £18 but £32; in Spain £34; in France £41; and in Italy £44 and that is the measure of the cost of excessive regulation and that explains also the attitude that I took and take upon the European Social Chapter. Those costs explain why it would be against our interests to be part of the Social Chapter.
Let us be plain about it! It isn’t just what is in the Chapter now, it is also a question of what would go into the Chapter if Britain signed it. The Social Chapter isn’t a finite list of specific measures, it is a mechanism, a mechanism to implement unspecified social policies in many cases by qualified majority voting so we would have no veto to protect British businesses. If we signed up to it, we would emphatically not be able to pick and choose which bits of it we wanted and at the moment the British opt-out focuses minds on the Continent on the competitive cost of more social regulation, it acts as a brake on further measures but if that brake went, if we signed it, if we were part of it, we would then see an avalanche of new measures building on other countries’ existing traditions and many of those measures would be precisely the sort of policies that we have spent the last 17 years getting rid of and I don’t want them back on the backs of British industry and British employers. [Applause].
Look at the sort of over-zealous – I think that describes it accurately – over-zealous employment regulations some of our partners have at national level. For example, in Germany, if your firm has more than 5 permanent staff you can’t cut staff without consulting the works council, pretty inconvenient I would have thought for huge companies striving in a very difficult market and if you want to work overtime in Luxembourg, you need government consent to work overtime. I could give you further examples but I will spare both you and our partners from them.
Just ask yourself this question: If all of Europe were in the Social Chapter, we signed up to it and became part of it, wouldn’t it be more tempting and less painful for our partners to try and foist the same rules on everyone rather than putting their own house in order? The answer to that is self-evident, of course it would and that is why we shouldn’t sign it. The Social Chapter could make jobs one of our fastest-growing export businesses and that is not in our interests.
Mr. President, at Maastricht I negotiated what became called “an opt-out from the Social Chapter”. That will remain but it must remain effective and in some ways there is a risk to it at the moment. I am not prepared to see that opt-out, undermined by the creative use of other articles of the treaty such as health and safety at work. We agreed those provisions in 1985 to deal with matters of genuine health and safety. Recent attempts to use them as the basis for imposing the working-time directive on Britain go far beyond what we agreed to and not only that, they breach the understanding I reached at Maastricht when I negotiated our opt-out from the Social Chapter.
I have told our European partners in clear and distinct terms that we must change the health and safety provisions so that they reflect the more limited scope that was originally intended and that we originally agreed to and I take this very seriously. We cannot be expected to have confidence in European agreements if they are subsequently undermined by shifts in interpretation. I do not want to be misunderstood about this. If old agreements are to be broken, I do not see how we can reach new agreements.
Mr. President, I want Europe to succeed. I have no doubt that our best interests are as part of the sort of Europe that I have tried to sketch out this morning but I don’t believe that Europe will succeed unless it faces the tough decisions necessary to win in tomorrow’s world and if it doesn’t, it isn’t only our continental partners that will lose, we will lose as well and that is why we need to be in the middle of the argument in Europe, not at the sidelines in the middle of the argument, arguing for the sort of Europe we believe in and care about and the business environment that will bring prosperity to our countries right across Europe.
Every time I go to south east Asia or the United States or Japan, I see the growth of competition that is coming from those parts of the world, I see how much of the world’s market they are eating up day after day after day after day and I ask myself: if Europe doesn’t lift its eyes and begin to see what is happening elsewhere in the world rather than in Europe, what will be our competitive position and our place in the world in 10 years or 20 years from now?
Those are the points at issue, that is why we are having the disputes that so often hit the daily headlines with our European partners. It isn’t a matter of this trivial subject, that trivial subject, this occasional dispute or that occasional dispute; it is a question of the direction in which Europe goes and whether it will go in a direction that can make it successful and competitive or whether it will shrink in on itself and find that slowly but inexorably it has less influence, less competition, less wealth, less prosperity and matters less in the world and fighting that battle is very much in our British national interest.
Mr. President, I don’t believe you make business more competitive by hitting them with extra costs like the Social Chapter, I don’t believe you create more jobs by imposing a minimum wage – and Heaven alone knows, with nearly 20 million people unemployed in Europe we need those jobs – I don’t believe you support the force of market by resisting privatisation, private ownership, which is what most people in most parts of the world have now accepted.
Why should we find it rejected in parts of some of the very centres of capitalism itself in western Europe? And you don’t reward hard work and initiative by a policy of high spending and high taxes not fair on the individual and crippling to the competitiveness of companies.
These are policies of importance, they are policies that if we don’t fight for in Europe I cannot see who will and if Europe doesn’t fight for them or a British government doesn’t fight for them, then the long-term impact of what happens in Europe and the washback upon what happens in this country scarcely bears contemplating. That is why I say we must be in the centre of the argument, that is why I don’t want the argument conducted in stereotypes on one extreme of the argument or the other extreme of the argument. We will never find everything in Europe to our taste, in truth we never believed we would but we need to make sure the balance of advantage is there for Europe and for us and for our future and these are central issues that are coming up for discussion in the inter-governmental conference and in decisions that will be taken beyond it.
We have seen for the first time in many years that we are more competitive than our European partners because we have followed the policies I have been talking about. We had a good argument to put over. We need to lift the atmosphere of confidence right across this country so that we can conduct our arguments with our European partners with confidence so that they don’t say: “Well, you are only saying that because there are disputes about European policy at home!”. We are saying it because we believe in it, believe in it for us and believe in it for them.
Mr. President, life in Britain is better than it has been for generations, our membership of Europe has on balance helped make it better. It can be better yet and we need, all of us – government, business big and small and individuals in every part of the country – to approach the decisions ahead determined to protect what has been achieved and then to build on it for the future. That is my responsibility and I intend to discharge it. The arguments will be difficult but I believe they can be won and I believe they will be won. [Applause].